Mukesh Ambani’s Reliance Industries has agreed to pay $3.4bn for the retail assets of India’s Future Group in a deal that gives Asia’s richest man a stronger foundation for a push into ecommerce.
The acquisition of the once-pioneering retail chain built by Indian entrepreneur Kishore Biyani will bolster Mr Ambani in his plans to battle Amazon and Walmart-owned Flipkart for dominance of India’s rapidly growing retail sector.
Reliance Retail was already India’s largest bricks-and-mortar retailer, operating supermarkets and convenience stores under the Reliance brand, as well as franchise stores for global brands such as Hamleys and luxury goods vendors.
But the acquisition of Future Group’s retail assets and its back-end infrastructure will give Reliance control of about one-third of the bricks-and-mortar stores of India’s otherwise fragmented modern retail sector. Future Group is known for its popular Big Bazaar hypermarket chain, Pantaloons clothing shops and other retail formats.
Analysts say the deal will give Reliance market dominance of physical retailing and make it more attractive to potential investors seeking exposure to India’s retail sector.
“By taking out Mr Biyani, and absorbing the second-largest retail network in the country, the gap between them and anyone else is so much that tomorrow, you can go to anybody saying: ‘If you want to do some retail business in India, I’m the partner to play,’” said Arvind Singhal, chairman of Technopak, a New Delhi-based consultancy.
Mr Ambani has sold stakes worth $20bn in his telecom venture, Reliance Jio, to 15 global investors this year, including Facebook and Google. He had also indicated his openness to partnerships in the retail business, analysts said.
In a statement on the Future Group deal, Mr Ambani’s daughter, Isha Ambani, director of Reliance Retail Ventures, said the company “is pleased to provide a home to the renowned formats and brands of the Future Group”.
The Future Group acquisition is the latest step in Mr Ambani’s transformation of Reliance Industries from a heavy industrial group to a consumer goods and telecoms conglomerate poised to profit from the rise of India’s middle class.
Prior to the coronavirus crisis, India’s retail market was worth an estimated $850m per year, of which about 10-11 per cent was modern retail formats, including branded bricks-and-mortar stores and ecommerce companies, while the rest of the industry was dominated by small, independently owned “mom-and-pop shops”. However, in the coming years, modern retail is expected to grow at the expense of smaller shops.
Selling his retail chain to Asia’s richest man is the culmination of years of struggle for Mr Biyani. The self-made entrepreneur was once dubbed “India’s retail king” for introducing Indian shoppers to large-format retail stores with an unprecedented choice of products under a single roof.
Mr Biyani’s retail foray began in the 1980s with clothing stores, including his Pantaloons shops, before he plunged into supermarkets, dazzling consumers in India’s big cities and small towns with vast product choices, competitive pricing and special discounts during religious and cultural festivals.
“He was relatively early off the mark, when the big boys were not there, and he almost got a free run of the market, and the attention of media and many others in the country,” said Mr Singhal.
But Mr Biyani did not develop a strong ecommerce platform. He has struggled in recent years with increasingly fierce competition from Reliance Retail and others, as well as from Flipkart and Amazon.
Analysts said Future Group was burdened with debt of more than $1.7bn, which it had been struggling to repay.